\u3000\u3 Guocheng Mining Co.Ltd(000688) 289 Sansure Biotech Inc(688289) )
Key investment points
Performance: the price of covid-19 products fell, dragging down the revenue and profit in 2021
In 2021, the company’s operating revenue, net profit attributable to the parent company and net profit attributable to the parent company after deduction were RMB 4.515 billion, 2.243 billion and 2.151 billion respectively, with a year-on-year decrease of 5.22%, 14.29% and 17.05% respectively; The cash flow from operating activities was 1.877 billion yuan, a year-on-year decrease of 28.96%. The price of covid-19 related products of the company decreased due to the intensification of China’s centralized procurement and market competition, which was the main reason for the year-on-year decline of revenue and profit in 2021.
In 2022q1, the company realized operating revenue, net profit attributable to parent company and net profit attributable to parent company after deduction of Non Profits of RMB 1.440 million, 652 million and 625 million respectively, with a year-on-year increase of 23.81%, 4.78% and 5.24% respectively; The cash flow from operating activities was RMB 1.877 billion, with a year-on-year increase of 79.37%.
Business analysis: the business growth of strategic production line is stable, and the profitability is expected to reach the bottom
① growth analysis: in 2021, the company’s strategic production line business income excluding covid-19 reached 758 million yuan, exceeding the target value of equity incentive by 740 million yuan. It can be seen that the non covid-19 business maintained stable and high-speed growth. In 2021, the delivery volume of covid-19 nucleic acid detection reagent increased by 135% year-on-year, but it still failed to hedge the decline in price, which dragged down the whole company. Looking forward to the future, the price of covid-19 nucleic acid detection reagent is expected to be reduced again after multiple rounds of centralized mining, and the space is limited. In terms of consumption, combined with the continuous spread of the more infectious Omicron virus and the overall epidemic prevention policy background of dynamic clearing in China, the demand is expected to continue to be strong; The strategic production line business is expected to maintain high-speed development under the company’s strategy of increasing investment and industrial layout.
② profitability analysis: the gross profit margin, net profit margin and roe of the company in 2021 decreased by 7.97, 5.27 and 19.93pcts respectively year-on-year, which is also related to the decline in the price of covid-19 related businesses. In a single quarter, the gross profit margin of 2022q1 decreased by only 0.97pcts month on month compared with 2021q4. We expect that the profitability of subsequent companies is expected to reach the bottom with the stabilization of the price of nucleic acid detection reagents, and rise with the achievements of the company’s industrial layout.
Strategic layout: the industrial chain layout is comprehensive and moves towards the IVD platform
The company actively transforms the anti epidemic advantage into the long-term driving force of the company. In terms of R & D, the company invested 188 million yuan in R & D in 2021, a year-on-year increase of 126.53%; In terms of sales, the company has promoted refined customer management in China and formulated the “5 + 10” strategy overseas to further expand its global influence; In terms of industrial layout, the company has successively participated in Zhenmai biology, quantumdx and Dasheng pet medicine, arranged ngs, POCT and pet testing, established wholly-owned subsidiaries Kangde biology, sokeya and Yuanjing Zhizao, and arranged key raw materials, quality control products, instruments and equipment in the field of in vitro diagnosis. We believe that after the digestion of covid-19 dividends and industrial layout, the company is now in the period of industrial cultivation and advantage integration in the transition to IVD platform enterprises. In the future, it is expected to launch the next round of growth engine under the gradual contribution of new business performance and mutual synergy.
Profit forecast and valuation
According to the performance in 2021, the company’s covid-19 related businesses still have strong support. The EPS forecast for 20222023 is adjusted to 5.92 and 6.48 yuan / share (formerly 5.66 and 6.53 yuan / share), and the EPS forecast for 2024 is increased to 7.07 yuan / share, with a year-on-year increase of 5.7%, 9.4% and 9.1%. The closing price on April 18, 2022 corresponds to 8 times of PE, maintaining the “overweight” rating.
Risk tips
The risk of new product promotion falling short of expectations, the risk of increasingly fierce market competition, the risk of IVD technology subversion and the risk of policy change.
